Medvedev Warns Crisis Is Spreading

MOSCOW — President Dmitry Medvedev warned that the crisis gripping Russia’s banks and capital markets has spread to the real economy and pledged to use the Kremlin’s still-massive oil wealth to provide more state aid for stricken industries.

His comments, his frankest on the subject yet, came as the World Bank cut its growth forecast for Russia next year by more than half because of the country’s acute dependence on oil prices. The bank said it expects the ruble to keep softening as it tracks oil prices lower.


“It’s not a question of if; it’s a question of how it will happen,” Zeljko Bogetic, the World Bank’s chief economist in Russia, said of the ruble’s decline. Russian officials have ruled out a sharp devaluation, but have increasingly hinted that the currency could be allowed to weaken slowly.

Earlier this year, government officials were touting a strong ruble as a symbol of Russia’s economic resurgence. But the currency has fallen by 5% against a dollar/euro basket since August, and Russia’s central bank allowed it to weaken by 1% last week, triggering speculation that it will be allowed to slowly shed value.

Wall St. Journal